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37 Water, LLC v. DHI Water & Environment

November 22, 2010

37 WATER, LLC, AN IDAHO LIMITED LIABILITY COMPANY, PLAINTIFF,
v.
DHI WATER & ENVIRONMENT, INC., AN OREGON CORPORATION AND JOHN DOES 1 THROUGH 20, WHOSE TRUE NAMES ARE UNKNOWN, DEFENDANTS.



The opinion of the court was delivered by: Honorable Candy W. Dale Chief United States Magistrate Judge

MEMORANDUM DECISION AND ORDER

INTRODUCTION

Plaintiff 37 Water, LLC ("37 Water") filed a complaint on June 8, 2010, against Defendant DHI Water & Environment, Inc. ("DHI"), in the district court of the Fifth Judicial District of the State of Idaho, in Blaine County, alleging breach of contract and defamation, and seeking injunctive relief. (Dkt. 1-2.) DHI removed the action to the Court on July 8, 2010, based upon diversity of citizenship under 28 U.S.C. § 1332(a)(c)(1).

(Dkt. 1.)

37 Water filed a Motion to Dismiss and a Motion to Remand on July 23, 2010. (Dkt. 6, 8.) The Court conducted a hearing on November 17, 2010, regarding both motions, at which the parties appeared and presented oral argument. After carefully considering the parties' arguments, memoranda, and relevant authorities, the motions will be denied for the reasons explained below.*fn1

BACKGROUND

According to the pleadings, 37 Water, an Idaho limited liability company doing business primarily in Blaine County, Idaho, entered into a written agreement with DHI, an Oregon corporation, on or about June 5, 2008, for the provision of consulting services. (Compl. Ex. A, Dkt. 1-2.)*fn2 37 Water hired DHI to develop an integrated surface and ground water model for the Big Wood River Basin in Blaine County, and to develop a water rights management tool interface. (Compl. Ex. A, ¶ D, Dkt. 1-2.)

The parties' Agreement specified that it: shall in all respects be interpreted, enforced and governed by and under the laws of the State of Idaho without giving effect to its conflicts of law provisions. The Parties each expressly agree to the appropriateness of and consent to the venue and jurisdiction of the State of Idaho in the County of Blaine and all state and federal courts having geographical jurisdiction for such County as the exclusive forum for the purposes of any action to enforce or interpret this Agreement.

(Compl. Ex. A, ¶ 28, Dkt. 1-2.)

37 Water filed its Complaint alleging DHI breached the Agreement by failing to produce working models by certain deadlines, and presenting non-conforming work. 37 Water alleges also that DHI failed to adhere to the confidentiality provisions in the Agreement and uttered false statements intended to injure 37 Water, and seeks an injunction to prevent DHI from utilizing the proprietary intellectual property developed as a result of DHI's consulting work. DHI denied the allegations and filed a Counterclaim of its own. DHI alleges that it substantially complied with the parties' Agreement, and that

37 Water breached the contract by failing to pay for services rendered. DHI includes a claim for unjust enrichment, contending that 37 Water will be unjustly enriched if it is allowed to retain and use the software models DHI produced without payment.

In support of its petition for removal, DHI submitted the Affidavit of Robert Carr, the President and Managing director of DHI. (Aff. of Carr ¶ 1, Dkt. 1-5.) Mr. Carr explains that DHI is headquartered in Portland, Oregon, although it has had a certificate of authority to conduct business in the state of Idaho since July 11, 2008. (Aff. of Carr ¶ 2, 5 Dkt. 1-5.) DHI maintains a satellite office in the University of Idaho Annex located in Boise, Idaho, which is staffed by no more than two employees. The satellite office's purpose is to collect data and perform preliminary work on projects located in Idaho. (Aff. of Carr ¶ 6, Dkt. 1-5.) Otherwise, all management decisions originate from DHI's Portland headquarters.

37 Water's Motion to Dismiss and its Motion to Remand present the same argument that this matter is not properly before this Court based upon the forum selection clause in the parties' Agreement, which specifies that the action must be brought in state court in Blaine County. 37 Water argues that DHI waived its right to removal pursuant to the Agreement by specifying Blaine County as the preferred forum. In the alternative, 37 Water claims that DHI does not meet the "nerve center" or "place of operations" test necessary to support diversity jurisdiction.

DHI argues in response first that the parties agreed Idaho law would govern the Agreement, and therefore Idaho Code ยง 29-110(1) invalidates the forum selection clause because Idaho has declared such clauses against public policy. Alternatively, DHI asserts the clause is unambiguous, and provides for jurisdiction in "all state and federal courts," which would include this Court. In support of its argument that the prerequisites for diversity jurisdiction are met, DHI relies upon the Affidavit of Mr. Carr and ...


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